GST Input not available on gifts or rewards given without consideration: AAAR

Appellate Authority for Advance Ruling (AAAR) affirming the decision of Authority for Advance Ruling (AAR) has ruled out that the gifts or rewards given without consideration even though they were given for sales promotion do not qualify as inputs for the purposes of Credit, since no Goods & Service Tax (GST) is paid on its disposal. Therefore, it was held that the input tax credit (ITC) on the inputs and input services involved in the goods and services used for the purpose of reward is not available for the appellant.

The claim of the appellant is that there was a 24% increase in sales during the period under the reward scheme when compared to the same period in the previous year and- that the scheme furthered the business and therefore the GST paid on the goods/services distributed under the scheme are eligible to the appellant is not acceptable in the given facts. Furtherance of business as imprinted in section 16 of the CGST Act conveys that the inputs or input services charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business alone are entitled for taking credit. Here ‘him’ denotes the taxpayer, but the promotional rewards scheme for which inputs and input services procured by him is meant for his buyers and not for his own activity like advertising the product, etc. But the fact remains that the non-obstante clause in Section 17(5) of the CGST Act, 2017 would make the argument of the appellant that the reward scheme meant furtherance of business futile and hence on both clauses (g) and (h) of sub-section (5) of section put an embargo on availability of input tax credit itself as such situations were obviously found in the reward scheme of the appellant.

This Ruling has been pronounced by Thiru M.V.S. Choudary, Member (Centre) And Thiru. K.Phanindra Reddy, Member (State).